MILLERKNOLL, INC. (MLKN) stock intrinsic value fair value estimate & owner earnings analysis

MillerKnoll is the company formed when Herman Miller bought Knoll in July 2021. It designs and makes office and home furniture under brands such as Herman Miller (including the Aeron chair), Knoll, Design Within Reach, HAY, Maharam, Muuto, Holly Hunt and NaughtOne. Fiscal 2026 (year ended May 30, 2026) sales were $3.84 billion: about 71% to businesses and institutions through a dealer network (the Americas Contract and International Contract & Specialty segments) and $1.11 billion through the Global Retail segment of stores, catalogs and websites. About 72% of sales are in the United States. How we measure earnings. We start from the cash the business generates from operations, take out temporary swings in inventory, receivables and payables, subtract stock-based pay as a real cost, and subtract the capital spending needed to keep the business running. On that basis owner earnings were $2.03 per share in fiscal 2023, $2.30 in 2024, $1.68 in 2025 and $1.72 in 2026. Non-cash charges are added back automatically, including about $38 million a year of amortization on intangible assets bought with Knoll and the large write-downs of fiscal 2025 ($130 million) and fiscal 2023 ($41 million). Because the company carries about $1.29 billion of borrowings, we value the business before its lenders are paid by adding back cash interest (about $63-71 million a year). We then subtract the debt. That pre-interest cash flow was $2.95, $3.25, $2.68 and $2.62 per share over fiscal 2023-2026. Which years we use. We use only fiscal 2023-2026. Earlier years describe a much smaller Herman Miller before Knoll, and fiscal 2022 was distorted by deal and integration costs. These four years include both the post-pandemic order surge and the office-furniture slowdown that followed, when sales fell 11% in fiscal 2024. The median is about $2.82 per share, or roughly $195 million a year. Pre-interest cash flow per share fell about 2% in fiscal 2026, and the order backlog fell from $761 million to $679 million over the year. The company reported a 3.4% sales decline for the first quarter of fiscal 2027, though orders rose. So we start the base case below the median, at $180 million, for the coming year. Tariff costs hurt margins in the first half of fiscal 2026 before price increases caught up, which is why we do not go lower. Capital spending rose to $122 million in fiscal 2026, partly for new stores. Because sales barely grew, we treat almost all of it as needed to stay in business, which is conservative. We credit no growth: sales have been roughly flat at $3.6-3.8 billion for three years, and the newer push to open more retail stores has not yet been proven through a downturn. Base case: about $191 million a year from year two through year twenty, then fading to zero over the following twenty years. We extend it that far because Herman Miller and Knoll have been designing and selling furniture through a dealer network for close to a century. We do not assume it lasts forever, because office demand has been shrinking: sales fell from $4.09 billion in fiscal 2023 to $3.63 billion in fiscal 2024. Discounted at 6%, the business is worth about $2.57 billion. Net debt is about $1.26 billion: $1.29 billion of borrowings and $63 million for stakes held by outside owners in partly owned subsidiaries, which those owners can require the company to buy, less about $98 million of cash beyond what operations need. That leaves about $1.31 billion for shareholders, or roughly $18.92 per share. Bear case: tariff pressure keeps cash flow near $165 million for two years. Then an office-furniture downturn like those of 2009-2010 and 2020 cuts it to about $110 million for three years. It recovers to about $170 million, holds for ten years, and fades to zero over the next fifteen. The company's record of large write-downs on acquired brands ($205 million in fiscal 2020, $41 million in 2023, $130 million in 2025) is one reason we use these lower levels. The bear case also assumes the revolving credit line ($309 million) and Term Loan A ($393 million), both due April 2030, are refinanced at about two percentage points more than today's rates of roughly 5.4-5.6%. Even in the downturn years, cash flow covers an interest bill of roughly $65-80 million. The business is worth about $1.87 billion against about $1.35 billion owed including the extra refinancing cost, which leaves roughly $7.54 per share. Bull case: price increases fully offset tariffs and cash flow returns to the fiscal 2024 level of about $225 million. It then grows about 2% a year through year ten as the newer retail stores mature, holds flat to year twenty-five, and fades over the following twenty years. The business is worth about $3.56 billion, and after $1.26 billion of net debt that leaves about $33.24 per share. Possible refunds of tariffs paid under the International Emergency Economic Powers Act are not included in any case, because the company says the amount and timing are uncertain. Debt matters a great deal here. Net debt is more than six times a normal year's pre-interest cash flow. Term Loan B ($547 million) runs to August 2032, and the receivables financing ($43 million) to September 2028. Debt repayment has been slow: borrowings fell only from about $1.41 billion in fiscal 2022 to $1.29 billion. Each $10 million change in annual cash flow moves the base value by roughly $2 per share. Changes since our previous analysis. Our earlier estimate (bear about -$9, base about $5, bull about $27) relied mostly on the two most recent years of cash flow. Those years still included the fiscal 2026 inventory build and all capital spending, and the estimate used higher discount rates. We now strip out temporary working-capital swings, take the median of four post-Knoll years, use one fixed 6% rate, and reflect risk through the cases instead. Separately, we now end each case's cash flows after a set number of years instead of assuming they continue forever, which lowers all three values. Overall, all three values are higher, mainly because of the fixed 6% rate and the working-capital adjustment. What would make this wrong: a deeper or longer slump in office furniture than past downturns, tariff costs the company cannot pass on, or more large acquisition write-downs that signal lasting damage to the brands.